IBC Advanced Alloys Corp.

Good morning, everyone. Welcome to this IBC Advanced Alloys Investor Update webcast to discuss the company's financial performance for the quarter ended September 30, 2024. That's IBC's first fiscal quarter of 2025. Hi, I'm Jim Sims. I'm Director of Investor and Public Relations for IBC. Before we begin the webcast, just a couple of reminders. Slides from today's presentation and the audio of this call are being broadcast live, and we're making a recording of those. That recording will be available for replay on IBC's website later today at www.ibcadvancedalloys.com. After our formal presentation, we'll take questions from webcast participants. Now, during today's presentation, we will be making some forward-looking statements, and viewers are cautioned not to place undue reliance on such forward-looking information and statements. Additional information identifying risks and uncertainties is contained in IBC's public filings, available on CDAR.com and on our website, again, at www.ibcadvancedalloys.com. Joining us today is Mark Smith, who is Chairman of the Board and CEO of IBC Advanced Alloys, Mark, welcome to this morning's broadcast and please proceed.

All right. Thank you, Jim, and welcome, everyone. Good to be back here for another quarter. So let's go ahead and start. And for those of you who are new to IVC, let me start by providing a quick overview of our company and our operations. We are an Indiana-based manufacturer specialized in copper alloy products for the defense and global commercial markets. We are the only company in the US that both casts and forges copper and copper alloy products as its primary business. We are known for the depth of our technical expertise and our ability to maintain the highest product quality by operating a vertically integrated copper alloy manufacturing facility. In addition to our 2022 expansion, we have room for additional significant expansion of plant operations at our current site. IBC makes a variety of specialty copper and copper alloy products for hundreds of customers across multiple industry sectors, including those shown here. It's very diverse. Next is a representative sampling of some of our customers, both past and current. These are names that everybody likes to do business with. In the third quarter of 2024, which is our first fiscal quarter of 2025, IBC's copper alloys division faced some relatively but really insignificant softer demand and higher material costs. However, in spite of this, the copper team was successful in driving relatively healthy sales revenues of $4.9 million which very closely matched our performance in Q1 of 2024 fiscal year. Operating income dropped ever so slightly as well, but gross profit, gross margin, and adjusted earnings stayed steady as compared to the prior year period. On a consolidated basis, we booked a $1.2 million loss. While copper revenue remained steady, quarter over quarter, this loss was primarily driven by three factors. First, continuing closing costs at our EM division. Second, higher than normal corporate SG&A costs, which were largely due to the EM division closure. And three, debt service payments. Here you can see more detail of our quarterly results split between our continuing operations at Copper Alloys and our discontinued operations at our EM division. The main takeaway for me at this juncture is this as closing costs at our discontinued em division wide down over the coming months i see us moving to a substantially stronger footing with significant opportunity for growth as we continue to pay down debt and strengthen our balance sheet through organic growth i see a great see a great deal of upside for the company going forward Here you can see the continuation of the upward trends at copper alloys over the past four years in revenue and adjusted EBITDA. The bar at the right shows our trailing 12-month performance at the end of our fiscal Q1 2025 period. Next graph shows a continuation of what I see as a nice turnaround for the company in terms of net income. My goal and that of our entire team is to continue to build on the profitable performance we achieved in fiscal year 2024. To that end, I see several growth opportunities ahead that I believe will help us achieve this goal. As you can see here, copper has been on a very strong upward trend in terms of gross profit and gross margins. since we completed our $5.7 million expansion and modernization of our copper alloys manufacturing facility in Franklin, Indiana, in 2022. This vertically integrated facility has 32,000 square feet of new production space, which now totals 83,000 square feet of 12 acres of land. It provides vertical integration of alloy casting, forging, which includes hammer, press, and ring rolling, heat treating and machining operations. It has helped to generate sales growth from about $13.7 million to more than $25 million a year. And it positions IBC to expand our business with additional capacity. Here are a few of the longer term macro trend or macro growth trends that we see continuing to drive demand for our products. The global expansion of 5G networks and the Internet of Things is increasing demand for materials across all of our copper product lines. Growth in the electronics sector is also driving greater demand for our products. As markets for electric vehicles expand around the world, we expect to see much more intensive use of copper. That's very bullish for IBC. A number of our customers are in the power generation sector, and that includes the rapidly intensifying work in fusion energy. If the USC's return to major investment in oil and gas production, that is also a potentially strong area for potential growth for IBC. One additional area of potential growth I want to highlight, and it could be a big one for us, is U.S. Naval Defense It's widely recognized by both political parties in the United States that America has seriously fallen behind in terms of its competitive position vis-a-vis China in terms of surface and subsurface naval ships. Some of you have heard me say this before, but it bears repeating. Just one Chinese shipyard near Shanghai has more capacity than all of America's shipyards combined. The U.S. Navy shipbuilding plans for 2024 through 2030 is aggressive and understandably so. Ultimately, the Navy wants to get a fleet to over 381 ships and 134 unmanned surface and underwater vehicles. This is from a forecast low of only 285 ships in 2026. A special emphasis will be on submarines, including the Columbia and Virginia class subs. IBC has supplied the Navy for a number of years with a variety of copper alloy products, including for Columbia and Virginia class submarines. We are an approved supplier to both Electric Boat and Newport News, which are the U.S. Navy's primary submarine builders. We are in discussions now with defense policy leaders in Washington, D.C., and with officials at both shipyards about potentially expanding our ability to provide them with the specialized alloys they need. I hope to have more of this growth opportunity in the months ahead. And with that, Jim, I'm happy to take any questions today.

Thanks, Mark. Let's just take some questions. For those in the audience this morning, simply type your question into the chat thread on the screen. For those participating in our listen-only phone lines, you can go ahead and email your questions to me at jim.sims, S-I-M-S, at ibcavancedalloys.com. Or you can text me at 303-503-6203. As some of these questions come in, Mark, we did get a number of them the last couple of days. So I'm going to go ahead and pass those on and we'll talk about those. So the first question is, what is the current status of subleasing the EMC property in Massachusetts?

You know that the current status of that is that it's ongoing. We have had multiple parties come out to the site, take tours of the site, and we're waiting for that process to mature right now. But we are also in discussions with the landlord about a possible ethical resolution there. And that is certainly our number one priority to close out the EM division in Massachusetts.

It's a follow on question, Mark. Are there still two employees on site at the EMC property?

We have two employees on the payroll. They are not necessarily there full time, but we do have two remaining employees.

And as a follow-on, were any of the EMC employees in Massachusetts moved to the Copper Division?

So far, none, but we still have high hopes that potentially one of those employees will move out to Indiana. But that's his personal choice, and we're waiting for that decision.

All right. How many EMC employees remain on the IBC advanced alloys payroll? We just did that, two.

Two.

Are there continuing discussions with the Department of Defense concerning funding for the copper alloys division?

Absolutely, there are. We see this unbelievable opportunity in the naval defense sector, and we are talking to as many elected officials and DOD officials as we possibly can. So let's keep our fingers crossed on that process.

And a follow-on question, Mark. Are there any discussions with the Trump transition team? I'll go and answer that. The answer is yes. And both the Biden administration and I think the incoming Trump administration Um, are going to do well in terms of policy and spending on naval defense. I think we may see more naval defense spending from this Congress going forward in the Trump administration. That's only good for us. It's good for America, but I think it's also good for ABC. So those discussions are definitely ongoing. Okay. All right. Um, are there prospects for additional copper division work in 2025 and beyond?

Yeah, absolutely. Our fantastic team, our fantastic family at the Copper Division is constantly looking for not only the organic growth with our foundational business, but the special one-off projects that can really supplement our operations and our revenue significantly. So that process never stops. Rajiv continues to do a great job of scouting out those potential projects and landing them wherever we can. We have multiple proposals out right now.

And are there plans for copper division plant expansion in 2025 and beyond?

Absolutely. I mean, it does depend largely on the DOD or Navy funding, which we're working on right now. But we have some other, you know, smaller, what I'll call capacity increases as well, where we can bring in, you know, another new CNC machine or something of that order, which isn't a multimillion dollar machine. growth effort, but it can significantly improve our capacity at the plant. So instead of machining two or three pieces a day, we can machine 60 pieces a day. That's a huge win-win for us. So we're still looking at those wherever it makes sense and wherever the customer base would allow for that expansion to occur.

Is IBC collaborating with NIO Corp on any technology developments at present?

There's really not much work along those lines that's going on right now. Most of the assistance that was going to be provided to Niocorp was going to be coming out of the EM division. And as we know, that's basically shut down now with the final steps of closure being taken as we speak. So not much collaborative work between the two companies in that regard anymore.

Okay. And I guess this is a bit duplicative, but will IBC play a future role in Niocorp's aluminum scandium development and or production?

I can see some room for that, but our focus right now is to finalize the closure of the EM division so we get that financial burden off of the company and to continue to grow copper, both foundationally as well as special projects. and potentially now going into the Navy arena as well. We want to stay focused on what we know we're best at, but IBC is a very, very top-notch metals and alloying company, and their skill set will certainly not be forgotten as Niacort moves down the road with its scandium-aluminum alloying and parts production processes.

Okay, here's an IP question, Mark. What has been done or will be done with the intellectual property rights to barrel cast that were developed, of course, by the EM division?

Yeah, there was actually no IP, legal IP associated with barrel cast in terms of a patent or trademark or anything like that. But what we did do was to keep it as a trade secret, which is a form of intellectual property as well, a legal form. And we did that because patents are regularly violated by the Chinese and Russian producers. And we really wanted to keep that as tightly within the company as possible. So we elected to treat all of that technology as trade secret information. And I think we were successful.

All right. Thanks, Mark. That is the last question that has come in.

Okay.

And so we'll go ahead and we'll wrap today. Thanks, Mark, for taking time to do this. I hope you guys had a wonderful Thanksgiving yesterday.

We did.

Take a few days of exercise to shed the excess weight that we all gained. Thank you all for joining us too on the webcast. We look forward to talking to you all soon. As I mentioned, we will be posting a recorded video of this slide deck and our presentation and the Q&A session later today on our website at www.ibcavancedalloys.com. This is Jim Sims signing off for the company. Have a wonderful weekend, everybody. Take care. Bye.